Steady but accelerating growth in India over last several decades: Junaid Kamal Ahmad, World Bank

Talking to ET Now, Junaid Kamal Ahmad, Country-Director, World Bank, says the message is keep the trading system open as much as possible as an open system will give all nations a chance for growth.

Edited excerpts:

What is your view on India's growth going ahead?

It is important to recognise that this report has not taken a short run view of the growth. We have taken a 50-year analysis to assess and understand where is India’s growth path going and we were very surprised by what we found. We found a steady but accelerating growth over the last several decades.

Two, we found a growth that is stable, that is not vulnerable to ups and downs of macroeconomic shifts.


Third, we have found it to be very diversified, that it is not only dependent on one source of growth but it is dependent on exports, it is dependent on investment and consumption.

And finally, we have found that the growth is well integrated globally. Going forward, we believe this country will move around the 7.5% growth rate, moving beyond 7.5% growth rate at 8% and above that it needs to truly bring down poverty in the country. For that, it will require important structural shifts in the banking system, in the way it delivers infrastructure and particularly, in the way it improves effectiveness and the competition of its markets.

What impact of inflows do you envisage for India, if at all, the federal bank decides to hike the magnitude as well as the quantum of the hikes?

In terms of interest rates that is really not the domain of the report or the analysis that we have done. It is the RBI’s domain but what we have looked at is the real sector. Whatever the macroeconomics is, the real sector fundamentally is ready to take forward Indian terms of its growth path and what we are saying it around the figure of 7-7.5% growth path this is what India has achieved and further structural reforms can indeed push India above that number.

Lending has taken a hit as far as the outlook is concerned and the role of auditors and regulators have yet again come to the fore after the PNB scam has come to limelight. Do you feel that is going to affect the banking sector at large?

It is important to look at the banking sector overall, not from one incident or one case. Getting IBC to function, the issue or recapitalisation, making sure recapitalisation works well but also making the banking system far more competitive. It is 70% state owned. The state has the ability to make a far more competitive banking system, including bringing in private sector in more effective ways. The key is creating a well-regulated, effective and competitive banking system and that is indeed where India is headed.

Do you feel discontinuation of LOUs is going to affect trade in a large way?

Look, trade is going to be affected by many factors. One of the things we are looking at is the investment behind the introduction of GST and all the economic corridors that are opening up. If investment of infrastructure to support these corridors are done correctly, there is going to be a big boost in growth internally and that is going to give India quite a buffer in the coming years.

What do the US tariff hikes mean for Indian exports at large? It is something which has been a part of the growing chorus since the past few years and protectionism is something which is again rearing its head. Do you feel that is going to affect Indian exports in a large way?

Junaid Kamal Ahmad: No, we in the World Bank and indeed and almost all multilateral institutions have one message which is keep the trading system open as much as possible, an open system will give all nations a chance for growth.